Five reasons to ditch that carrier contract and go prepaid with your smartphone

As you may remember from last month, I am currently in search of my next smartphone and, consequently, my next smartphone plan. In my look at the big four US carriers, I came away unimpressed with most of their plans, which are expensive and lock you into two years of service with the same device unless you pay hefty upgrade fees. In the end, I settled on one of T-Mobile’s “Monthly 4G” prepaid plans because it happened to offer most of the features I wanted at a very cheap price, but also because it is a no contract plan.

Even though many people don’t seem to know about them, no contract or monthly prepaid plans are not just for feature phones anymore. Using one with your smartphone is very easy, and if you have a GSM device then activating a monthly plan is often as easy as buying a SIM card and making a call. It doesn’t matter what device you have, just put the SIM into your device and nearly everything will work. Carriers, however, don’t seem to advertise them as much as contract plans because they don’t make as much money, but no contract plans are still often a very good deal.

In fact, other than the sometimes hard to stomach cost of an unlocked smartphone, they have a number of advantages and benefits. In the rest of this article, I will go over the top five features of no contract plans that I find most useful, and that may be of interest to those looking to buy a new smartphone service plan, even though there are many more benefits than what appears here.

Cheaper price

The main benefit that anyone who uses a smartphone can get from a no contract plan is very simple: a cheaper price. As demonstrated by T-Mobile’s and other’s prepaid monthly smartphone plans, it is possible to offer unlimited everything at prices under $100. What makes this possible for no contract plans is that the price of the plan does not have to include a subsidy for the device. With a normal contract plan, you get a discount on the up front cost of a device and pay it back over time as a hidden addition to your bill. With a no contract plan, you get no subsidy, so the cost of your plan doesn’t have to include the extra cost normally used to subsidize the device. Of course, you do have to pay the higher up front cost of a device, but that is a one time purchase. Once done, the phone is yours, with no messy early termination fees or early update fees. You own your phone and are in control, which brings me to the next reason to go off contract.

Freedom to change phones

Because you own your device with a no contract plan, you can also change phones as often as you want without any upgrade fees or penalties. Especially if you use a GSM device, it will usually be possible to simply buy a new device and transfer the SIM card without any help from the carrier, making it almost trivial to switch between devices. This is especially useful for me when I have to review GSM devices that aren’t my daily smartphone, as I can just transfer the SIM and have everything work as needed for as long as I want. Others may also like the ability to buy a device, and then sell it and get a new one whenever they feel like it. So while it may not be for everyone, the freedom to change devices is still a useful benefit of the contract free plan.

Freedom to change plans

In addition to being able to change devices as you wish, contract free plans also allow you to change your specific plan as often as you wish. This may seem like an odd and complicated ordeal, but I think an example of one way this ability might be useful may help clear everything up. Let’s say that I usually use a cheap plan with only 100 minutes of talk time and 5GB of data per month. If I know that I will be doing a lot of traveling the next month, then I can upgrade just for that month to a plan with 1,000 or even unlimited minutes. Depending on the carrier, that may cost $20 more or $100 more, but the point remains the same. The ability to be flexible with the exact plan that I purchase any given month allows me to pay just for what I need, and not any more. In other words, why pay for unlimited minutes every month with a contract plan if you really only need a lot of minutes in December? This approach may require a bit of planning, but it demonstrates just one scenario where the ability to easily change your plan on a monthly basis can make your smartphone experience better, while also allowing you to save money.

Freedom to change carriers

A common worry consumers seem to have about prepaid plans is that the prices could change unexpectedly, whereas a contract plan should be consistent for two years. While this is certainly possible, I have yet to see a carrier make a major and unreasonable change that would force customers to stop using their plans. In the rare case that you do have a problem with your current carrier, though, another benefit of the no contract plan kicks in: the ability to freely change carriers or stop service anytime you want with no penalties. Whether you didn’t like their coverage, your data wasn’t fast enough, or they changed their rates and the new plans aren’t to your liking, you can always cancel a prepaid plan at the end of the month. Yes, contract plans shouldn’t have a problem with the plan changing mid contract, but what if you move during the first year of your contract and no longer have coverage from a particular carrier? A good carrier would still let you out of the plan without fees, but with a no contract plan you know that you won’t have any problems switching companies. Regardless of what makes you want to switch carriers or even get rid of your smartphone plan completely, the ability to do so without any hassle or penalties is yet another of the benefits of the no contract plan.

No overage fees

When you prepay for your smartphone plan, you get exactly what you pay for, and no more. There is no bill at the end of the month, and thus no opportunity for the wonderful surprise that is bill shock, and the realization that you accidentally went over your data/text/voice limit and now owe hundreds of dollars to your carrier. With a prepaid no contract plan, if you use up your minutes, then you can’t make any calls; if you use all your data, you can’t download anything else; and if you use all your texts, you simply can’t text anymore, at least until you renew your plan. Obviously, this may not work for those who need to always know their smartphone will make calls or have data, but for most people this shouldn’t be a problem. Even if you go over your limits, a quick call to the carrier and an early renewal of your plan will have your device running normally again in no time. So, unless there is some situation where you absolutely must make a call and won’t be able to renew your plan beforehand, going prepaid is a great way to know and control what you spend on your smartphone service plan every month.

As you may have picked up on, freedom is a big part of the reason that I like contract free plans. In my situation, it simply doesn’t make much sense to sign a two-year commitment to any one carrier, just to save a couple hundred dollars of the sticker price of a smartphone. With the Galaxy Nexus at $399, I can own a perfectly modern device at only $100 more than some more expensive contract phones, and reap all the benefits of the no contract smartphone plan. Of course, as with nearly everything related to purchasing a smartphone, the advantages will vary by buyer, and no contract plans may not be right for everyone. However, no contract smartphone plans seem to be an option often overlooked by consumers, and the market shows that most buyers automatically sign up for contract plans. As such, I hope that this information will be able to bring to light some of the reasons consumers might want to switch to a no contract plan, and perhaps also help some buyers save money and have a better experience with their smartphone.

About the Author

Aaron Orquia is an associate editor at Pocketables. He has been using Android and Linux since he bought his first computer years ago, and his interest in technology, software, and tweaking both to work just right has only grown stronger since then. His current gadgets include a OnePlus One, a Pebble smartwatch, and an Acer C720 Chromebook.

I discovered this idea a few months ago myself. With Google Voice and an app called “Groove IP” I actually went WITHOUT a carrier for the first few weeks. All my calls and text could be handled over wifi, which makes since as I have wifi around me all day— home, work, and even commute. Even my grocery store has free wifi!

However I will say that I did buy and activated a “Pay as you go” plan from T-Mobile— just in the rare chance that I need to make a call/text when away from a wifi connection. But here I am, saving 80 dollars a month!

xoen

what a nonsense.

fab

…what a nonsense is your comment without further explanation

Homeless

Does anyone has recommendations for under $50 for 300 minutes voice, unlimited text, & unlimited data (+/-36GB monthly usage, including tethering phone as a modem)?

Great article. My 2-year contract expires at the end of this month. Will be looking into off-contract phones. The hard part is swallowing the upfront cost for a new unlocked phone. The new Samsung SIII is nearly $800.

Would love to see an article comparing the different carriers pre-paid and off-contract plans.